Statutory and Suggested Definitions

• Jurisdiction: Maryland

V. Statutory and Suggested Definitions

A. In General

Many terms are statutorily defined. Since it is axiomatic that parties to a contract are presumed to be mindful of existing law,³⁵ it behooves the drafting attorney to understand how certain crucial terms in a contract have been defined by the legislature. Even when these terms are not controlled by the statutory definition, the drafter may want to make use of that definition by reproducing it within or incorporating it by reference into his or her document. What follows are several definitions from Maryland statutes, as well as definitions I have used or seen used in practice. No effort has been made to list every statutory definition or contractually defined term I have unearthed. Rather, this extensive, but not exhaustive, roster of definitions is intended as a resource of suggestions that may help the drafter in constructing his or her own definitions in a contract.

Drafting Tip

A drafter who uses statutorily defined terms in a manner where they are intended to have a different meaning should specifically state the meaning intended. Even in a contract that does not fall under the governance of the U.C.C., a court may take instruction from the quoted definition in the absence of the expression of a contrary intent.

B. Term Definitions

1. Address

"Address" is defined as meaning a street and number.³⁶ Implicitly, this excludes a post office box. Some statutes, such as § 33-602(1) of the Connecticut General Statutes, specifically distinguish between "address" and "mailing address," with the latter term including a post office box. If it makes a difference in your contract, be sure to specify what you mean. Note that many private delivery companies (UPS, FedEx, etc.) will not make deliveries to a post office box.

Drafting Tip

If the parties contemplate deliveries by UPS, FedEx, or other private delivery services, make sure the contract specifies a street address for delivery.

2. Adult

"Adult" is defined in Cts. & Jud. Proc I § 3-801(d) as an individual who is at least 18 years of age. Note, however, that Md. Code Ann., Estates & Trusts § 13-301 (2017 & Supp. 2019) (hereinafter Est. & Trusts § ___) defines the term as "an individual who has attained the age of 21 years." For capacity purposes, the age of majority in Maryland is 18 (see the discussion of capacity in Chapter 2). Because of this disparity, it is always best to define this term when used in a contract. The drafter should not necessarily presume that "child" means the same as "not an adult" (see entries for "child" and "minor" below). At one time, the common law definition of "child" was "one who had not reached the age of 14." More commonly, the term denotes lineage rather than age.³⁷

Drafting Tip

Use the terms "adult" or "minor" to refer to age; "child" should be used only to refer to lineage.

3. Advertisement

"Advertisement" means a communication that:

(1) is published in connection with an offer to sell or sale of a franchise; and

(2) is either:

(i) written or printed;

(ii) made by means of a recorded telephone message; or

(iii) spoken on radio, television, or similar communications media.³⁸

Although the definition above specifically relates to the sale of franchises, it is a well structured definition and will make a good starting point for drafters of contracts where advertising plays a role. The drafter should keep in mind that, in terms of basic contract law, an advertisement is not an offer, but rather an invitation to make offers.³⁹ The buyer makes the offer when they post at the seller's location with intent to buy.

4. Affiliate

"Affiliate" means any individual who is an ancestor, descendant, sibling, or spouse of a party to this agreement; any individual or entity which controls an entity which is a party to this agreement; all of the owners of any entity which itself is a party to this agreement; or any entity which is, directly or indirectly, controlled by a party to this agreement. The term "control" as used in the immediately preceding sentence means the right to exercise, directly or indirectly, more than 50% of the voting rights of the outstanding ownership interests of the entity.

This definition illustrates a common problem with lexiconic definitions: the difficulty in constructing a complete definition of one term without using another term that also needs to be defined. An alternative is to simply replace the word "control" in the preceding definition with the words used to define it. This would give us:

"Affiliate" means any individual who is an ancestor, descendant, sibling, or spouse of a party to this agreement; any individual or entity which has the right to exercise, directly or indirectly, more than 50% of the voting rights of the outstanding ownership interests of an entity which is a party to this agreement; all of the owners of any entity which itself is a party to this agreement; or any entity as to which a party to this agreement has the right to exercise, directly or indirectly, more than 50% of the voting rights of the outstanding ownership interests.

This term may be important in any contract dealing with business entities (see discussion in Chapter 2). The term is sometimes used without definition, presumably by drafters who assume that the term has some specially defined meaning. There is, however, no statutory definition of this term in Maryland law. For federal corporate income tax purposes, it is defined as one or more chains of corporations connected through stock ownership with a common parent corporation which is an "includible corporation," provided certain requirements are met.⁴⁰

Contract drafters are apparently not the only ones who incorrectly assume that there is a standard, accepted definition of this term. In a case involving the federal Telephone Consumer Protection Act of 1991, Judge Adkins of the Court of Special Appeals lamented that, while the term was used in FCC regulations, there was no definition of it in the law upon which those regulations were based. In that case the judge turned to a definition in the most similar law that could be found:

The term "affiliated entity" appears only in the FCC's regulations under the TCPA, and is not in the language of the TCPA itself. Although we found no definition of the term in the TCPA context, we note that Congress has defined "affiliate" under the Federal Communications Act of 1934, as amended. In the "definitions" section, Congress provided that:

[T]he term "affiliate" means a person that (directly or indirectly) owns or controls, is owned or controlled by, or is under common ownership or control with, another person. For purposes of this paragraph, the term "own" means to own an equity interest (or the equivalent thereof) of more than 10 percent.⁴¹

5. Agreement

If a contract contains only one definition, it is probably this one. Although the term is frequently defined using a parenthetical in the exordium, sometimes it is separately defined also. For tax purposes, the term "partnership agreement" specifically includes any amendments made before the time for filing the partnership tax return.⁴² Most courts would probably assume that the use of the term includes any amendments or modifications. For example, federal Judge Teel, writing for the U.S. Bankruptcy Court for the District of Maryland in In re Doctors Health, Inc.,⁴³ commented that his references to an amended agreement included both the original document and the amendments. To be safe, drafters often used a definition similar to this:

"Agreement" means this contract, as originally executed and as amended from time to time in writing.

6. Appraisal and Appraiser

"Appraisal" is defined broadly in the Business Occupations and Professions Article as meaning "an analysis, conclusion, or opinion about the nature, quality, utility, or value of interests in, or aspects of, identified real estate," but the term specifically is said not to include an opinion to a potential seller or third party by a real estate agent or broker regarding the recommended listing price or recommended purchase price of real estate, provided that the opinion is not referred to as an appraisal.⁴⁴ By contrast, Md. Code Ann., Real Property § 12-201(b) (2010 & Supp. 2014) (hereinafter Real. Prop. § ___) defines the term as "a written statement independently and impartially prepared by a qualified appraiser setting forth an opinion of defined value of an adequately described property as of a specific date, supported by the presentation and analysis of relevant market information." No Maryland statute, however, defines the term "qualified appraiser." With respect to housing insurance regulations, the Code of Maryland Regulations defines "qualified appraiser" as "an appraiser who is licensed under applicable licensing requirements of the State and federal governments and submits work of a quality acceptable to the Maryland Housing Fund."⁴⁵

Appraisers are often used to determine value in a buy-sell agreement. Because the term is ill defined by law, it is always a good idea to specifically designate an appraiser, or specify the method for choosing one. There are several private organizations who credential individuals as appraisers, and one way of ensuring qualification is to reference those organizations. A definition meeting this criteria might look like this:

"Appraiser" means Jones and Smith, LLP, or any other credentialed business appraiser who has been recognized as such by the National Association of Certified Valuation Analysts, the American Society of Appraisers, the Institute of Business Appraising, or the American Institute of Certified Public Accountants; or a certified public accountant who has been regularly engaged by the Company for business accounting or tax matters for a period of at least two (2) years; or any other Person unanimously approved by the Owners.

Drafting Tip

When referring to a "qualified"

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